Is this deal to good to be true?

Question

Duplex: C area

LP: $104,999

2 x 2/1 w/ month to month tenants 10+ years both sides

Rent: $650/each

Taxes: $1140/yr

Insurance $860/yr

Units have own meters for water and electric

Roof 12 yrs old

A/C 1: 8 yrs old, A/C 2: 2 yrs old

HWH 1: 8 months old, HWH 2: 19 yrs old

I tried to run the numbers on bigger pockets, but the last page of the calculator keeps loading as an error for me. I did the quick 4 square math and the deal seems too good to be true... As a new MF investor i am just making sure i'm not overlooking something before i make an offer.

Darius Hollis · Answer

@William Huston

Make sure you get a great inspection, look into the tenants payment history and long-term prospects to make sure they consistently pay on time and also verify every detail the seller presents to you. Also think of the worst case scenarios to protect yourself:

Is the property or area improving? What is the annual appreciation looking like? Would you be able to replace the tenants if they suddenly moved on?

There are a lot of considerations to take into account, especially investing in C areas.

Best of Luck!

William Huston · Answer

Well i did get to see the property today, there was unfortunately 3 other investors there also. The location is was ok... about a C area. The house was pretty well maintained. The exterior is in decent condition and the roof looked really good for 12 years old. The right unit is the one the older lady has lived in for a long time, it was actually in not bad shape. She took great care of the property. The most it would need is an update to the kitchen later on, but it all functions. The bathroom looked a little worn in the shower, but she was not complaining of it. The left unit was not in as nice of shape. the floors are probably going to need to be replaced with all new carpet or something else. The bathroom looked like it hasnt been scrubbed in years, the residue on the walls was thick. The kitchen was ok, but could really use a really really good cleaning. The person living in it is a man who is tied to an oxygen tank so he isnt able to do much really.

In regards to the payment history i cant really get that info right now. The agent said that the property is part of a trust sale from a person passing away with no instructions on paperwork on what to do with the properties or where they kept the books on the property.

Natalie Kolodij · Answer

Even the rent/price is only hitting 1.2%...that's not a home run to me.

John Leavelle · Answer

@William Huston What are your numbers?  You need to provide us with what you are using to conduct your analysis.  What are you using for expenses?  What about any rehab costs?  What are you putting aside for the upcoming CapEx costs (Roof, water heater, etc.)? What kind of financing are you using?

The more information you can provide the better we can help you.  :)

Zach Quick · Answer

@William Huston Why does it seem too good to be true? Have you actually seen the inside of the apartments? Typically a 10+ year tenant will require a full unit turn. The roof will likely need replaced in 5 years or so, never know if 12 is the true age.

Is this deal to good to be true?

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